Banks, Agents Cut Deal on Insurance Piece of Financial Reform Bill

Banks, Agents Cut Deal on Insurance Piece of Financial Reform Bill

Article excerpt

With a Senate panel poised to vote next week, financial industry negotiators said Tuesday that they have tentatively compromised on some controversial parts of the financial reform legislation.

Banking industry participants were optimistic their partial deal with the insurance industry could lead to a breakthrough. But they emphasized that they have not agreed to support the overall bill yet because parts of the deal are fragile and key disputes on other matters remain unresolved.

"We have much more in agreement than we have in disagreement," said L. Thomas Block, a lobbyist for Chase Manhattan Bank who participated in the talks. "This is a formula that could lead to legislation this year."

Under the compromise, bankers and insurance agents have generally agreed on the consumer protections states could impose on bank insurance sales, said Michael P. Smith, president of the New York Bankers Association.

Though details remained sketchy, he said negotiators had agreed to drop a requirement that banks sell insurance and banking products from separate desks in a branch. "We have agreed on a modified safe harbor for state insurance sales regulations, which deletes the most objectionable provisions the banks have identified," said Mr. Smith, whose group hosted some of the talks that began in July.

In addition, the deal would delete a requirement in the legislation that banks must buy an insurance agency in a state before attempting sales there.

The compromise also would preserve protections banks won in the Supreme Court's landmark Barnett decision by letting the Office of the Comptroller of the Currency override state laws that "prevent or significantly interfere" with insurance sales by national banks.

It would also protect banks against any new state law that is unfair but not stiff enough to "significantly interfere" with bank insurance sales, negotiators said. …